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New law would make it easier to switch banks

Switching banks is something a lot of people resolved to do last year because of new fees and being fed up with banks' behaviors. Even so, a lot of people didn't switch because of all the hassle involved. Now, just as the banks look to be raising fees again, a new law in Congress would make it easier to switch banks by letting you keep your account number -- just like you can now keep your phone number.

While Bank of America (BAC) and other major banks backed down over plans to charge a fee just for having a debit card, other fees look to be on their way. In a weak economy, banks are looking to make extra money any way they can, so new and more expensive charges are almost a certainty. Consumers can look forward to new checking account fees, higher fees on out-of-network ATM's, costlier paper checks and safe deposit price hikes.

Some banks are even charging you to stop doing business with them. Chase (JPM) and PNC (PNC) are just two of the firms already charging a $25 fee just to close certain accounts.

Although 14 percent of customers are expected to switch banks this year (a five-year high), this is believed to be just a fraction of the number who would do so. The more services you use at your bank, the less likely you are to switch. Just 1.5 percent of checking customers who use direct deposit, online banking and electronic bill payments switch banks each year, compared with 20 percent who have a checking account alone, according to Celent, a financial consulting firm. Most bank customers use some if not all of those services. More than half of use direct deposit and nearly 40 percent use online bill pay, according to AlixPartners, a global consulting firm.

That's because having to do all the paperwork to dump your bank is daunting. It can involve notifying companies that send electronic bills straight to your bank, changing account numbers for your direct deposit, and maintaining the old accounts until all transactions have cleared.

Those problems wouldn't exist if you could take your account numbers with you, like you do with a phone number. Congressman Brad Miller (D-NC) has introduced a bill that would let you do just that. The Freedom and Mobility in Consumer Banking Act would "make it simpler to close accounts, and for 30 days following the closure, any direct deposits would have to be transferred to the new bank free of charge," Miller says.

"During that period, banks would also be obligated to notify customers when a recurring debit occurs. This measure wouldn't completely remove all the hassles of switching banks, but would protect consumers from unnecessary fees and grief," Miller adds.

Not only would the bill force banks to compete harder for customers, it also has technology on its side as well. The mechanisms to transfer accounts are already in place. The FDIC uses them whenever it takes over a failing bank and transfers accounts to a new bank. This technology is well-tested and work seamlessly.